Income Tax Appellate Tribunal - Delhi
Silver Stone Developers Pvt. Ltd., New ... vs Assessee on 14 August, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'G' : NEW DELHI)
BEFORE SHRI J.S. REDDY, ACCOUNTANT MEMBER
and
SHRI A.T. VARKEY, JUDICIAL MEMBER
ITA No.1564/Del./2011
(ASSESSMENT YEAR : 2007-08)
M/s. Silver Stone Developers Pvt. Ltd., vs. JCIT, Range 8,
11th Floor, Narain Manzil, New Delhi.
23, Barakhamba Road,
New Delhi - 110 001.
(PAN : AAJCS7580H)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : Shri R.M. Mehta, AR
REVENUE BY : Shri K.K. Jaswal, Senior DR
Date of Hearing : 15.07.2015
Date of Pronouncement : 14.08.2015
ORDER
PER A.T. VARKEY, JUDICIAL MEMBER :
This appeal, at the instance of the assessee, is directed against the order of the Commissioner of Income-tax (Appeals)-XI, New Delhi dated 10.02.2011. The relevant assessment year is 2007-08.
2. The grounds of appeal taken by the assessee read as under :-
"1. The Order passed by the CIT (Appeals) is erroneous both on facts and in law and contrary to the principles of natural justice in as much as submissions made orally and in writing have not been dealt with in the order.
2. Without prejudice to Ground No.1 above, the CIT (Appeals) erred in taking the view that the notice u/s 143(2) had been served within the statutory period when in fact there was no rebuttal from 2 ITA Nos.1564/Del./2011 the side of the AO to the stand of the appellant that such a notice had not been served within the statutory period. The assessment in fact was barred by limitation.
3. The CIT (Appeals) further erred in upholding the action of the Assessing Officer in disallowing interest paid to the tune of Rs.14,53,091/- towards business purposes.
4. Without prejudice to Ground No.3 above, the CIT (Appeals) erred both on facts and in law in not dealing with the alternative claim that the interest paid to the tune of Rs.14,53,091/- be set off against the income from interest to the tune of Rs.35,99,000/- .
5. That the appellant craves leave to reserve to itself the right to add, alter, amend, substitute, withdraw any Ground(s) of appeal at or before the time of hearing."
3. First of all, we will discuss Ground No.2 wherein the assessee has challenged that the CIT (Appeals) erred in taking the view that the notice u/s 143(2) had been served within the statutory period, when in fact there was no rebuttal from the side of the AO to the stand of the assessee that such a notice had not been served within the statutory period and the assessment in fact was barred by limitation.
4. Brief facts relating to the aforesaid ground no.2 is as follows :
The assessee is a private limited company incorporated on 29.07.2005 and was engaged in the business of real estate. The return of income for the assessment year 2007-08 was filed on 18.10.2007 declaring total income of Rs.20,39,990/- which was processed u/s 143(1) of the Income-tax Act, 1961 (hereinafter 'the Act'). As per assessment order, the case was selected for scrutiny and notice u/s 143(2) of the Act was issued on 26.09.2008 and served on the assessee and also a detailed requisition 3 ITA Nos.1564/Del./2011 u/s 142(1) was also issued and served to the assessee vide letter dated 30.06.2009. During the assessment proceedings, the AR for the assessee appeared and explained the various relevant issues, filed the requisite details and produced necessary evidences. Accordingly, the assessment was completed at an income of Rs.34,93,100/- u/s 143(3) of the Act.
Against the order of the AO, the assessee preferred an appeal before the CIT (A) where he had also taken a ground regarding non-serving of statutory notice u/s 143(2) of the Act within the prescribed time before proceeding for scrutiny assessment. The ld. CIT (A), after examining the submissions made by the AR for the assessee before him, held as under :-
"2.3 Examined the rival submission. The record as available before me shows that after selection in this case notice u/s 143(2) was issued on 26.09.08 and as per the Ld AO it was duly served. It is admitted that before scrutiny, statutory notice is required to be served within six months from the end of the FY In which the return was filed. So ideally the notice could be served till 30.09.08. The asstt order reveals that the notice dated 26.09.08 was duly served on the appellant and hence it is served on or before 30.09.08 which is the last date for filing of such statutory notice. The appellant is questioning the same but barring submission of letter no other attempt was made before the AO to establish such fact. In fact it is an allegation which is not substantiated with facts and hence at this stage I am unable to take any cognition of such claim. The ground is hereby disposed of in favour of Revenue and against the appellant."
5. The ld. AR for the assessee submitted before us that the return of income filed on 18.10.2007 which was processed u/s 143(1) by the DCIT, Circle 8(1), New Delhi vide intimation dated 18.02.2009. Ld. AR submitted that on 05.03.2009, the assessee company, through Speed Post, 4 ITA Nos.1564/Del./2011 received a Notice u/s 143(2) of the Act along with a questionnaire and later on, another notice was issued u/s 143(2) on 30.04.2009 along with the same questionnaire. Ld. AR further submitted that as per the AO, notice u/s 143 (2) of the Act was firstly issued on 26.09.2008 and served upon the assessee but actually the same was not served on the assessee. Ld. AR submitted that the assessee also requested the AO vide letter dated 19.05.2009 to provide a copy of any earlier Notice issued u/s 143(2) which was validly served upon the assessee within the statutory time period. It was submitted that further, the assessee again, vide letter dated 10.07.2009, requested the AO to provide evidence for service of a valid Notice issued under the provisions of section 143(2) but, for reasons best known to the AO, no evidence was provided to the assessee for service of the said Notice within the statutory time period. Ld. AR submitted that later, the case was transferred to the jurisdiction of the JCIT, Range 8, New Delhi who proceeded with the assessment proceedings and passed the impugned order u/s 143(3) of the Act on 29.12.2009, without ensuring that the assessment proceedings had been validly initiated by his predecessors. 5.1 Ld. AR further submitted that an RTI application dated 12.12.2013 was filed before the AO to ask that "whether the notice dated 26.09.2008 u/s 143 (2) was issued and if the reply to the aforesaid is in the affirmative then the date of service of the notice on the company and the mode of service thereof." In reply to the said RTI, the Department replied that the 5 ITA Nos.1564/Del./2011 aforesaid notice dated 26.09.2008 was issued but the date of service of the notice on the company and mode of service had not been mentioned. 5.2 Ld. AR submitted that a notice u/s 143(2) could not be served on the assessee after the expiry of six months from the end of the FY in which the return was filed. He submitted that in the instant case, the assessee had filed its return of income on 18.10.2007, therefore, a notice u/s 143(2) of the Act could have been served on the assessee till 30.09.2008. However, the department failed to produce any cogent evidence to substantiate that section 143(2) notice has been served upon the assessee on or before 30.09.2008, despite the assessee raising the said objection time and again before finalization of scrutiny assessment . Accordingly, the notice u/s 143(2) issued on 05.03.09, which was served on the assessee was clearly barred by limitation under the proviso to section 143 (2) of the Act. In this view of the matter, the ld. AR for the assessee pleaded that the assessment proceedings had been completed on the basis of Notice u/s 143(2) of the Act dated 05.03.2009, which was thus clearly barred by limitation, therefore, the impugned assessment order is null and void, and bad in law.
6. On the other hand, the ld. DR relied on the orders of the authorities below. Ld. DR further pointed out that assessee vide letter dated 10.07.2009 to the AO had claimed that the notice u/s 143(2) was sent by Speed Post was not received by it, so he wondered as to how the assessee 6 ITA Nos.1564/Del./2011 could have come to know that the said notice had been sent by speed post without getting a copy of it, so he does not want us to interfere in the impugned order.
7. We have heard both the sides and perused the material on record. We note that the assessee had filed its return of income on 18.10.2007 and the same was processed u/s 143(1) vide intimation dated 18.02.2008. Further, we note from a perusal of the assessment order that a notice u/s 143(2) of the Act was served on the assessee on 26.09.2008, but the assessee had raised objections against the non-receipt of said notice issued u/s 143 (2) vide letters dated 19.05.2009 and 10.07.2009. We find that the said objection of the assessee was not addressed by the AO before the impugned assessment was passed. We find that the AO had not provided any evidence to the assessee for service of the said Notice within the statutory time period as prescribed by the statute. Moreover, we take note that vide order sheet entry dated 05.12.2013, the Tribunal directed the department that "the assessee may take inspection of the assessment record and the AO is directed to furnish copies of the papers/documents etc. that may be sought by the assessee from assessment record". But, we find that despite the clear direction of this Tribunal, for reasons best known to them, the assessee was not allowed the inspection and also not provided with the documents it sought for. We also find that in this regard, the assessee also filed an RTI application dated 11.12.2013 asking whether the 7 ITA Nos.1564/Del./2011 notice u/s 143(2) dated 26.09.2008 was issued and the date of service of the notice and also the mode of service; the department only replied that the said notice was issued but the date of service and mode of service had not been mentioned. In the light of the aforesaid facts and circumstances, we have to draw adverse inference against the department on this issue, and believe the contention of the assessee. We observe that in this view of the matter, the ld. AR for the assessee has rightly pleaded that the assessment proceedings which had been completed on the basis of Notice u/s 143(2) of the Act dated 05.03.2009, which according to the assessee it received for the first time, was barred by limitation, therefore, the impugned assessment order is null and void, and bad in the eyes of law. Even, section 292BB will not rescue the AO for non-serving the notice because we find that assessee had raised this objection before the AO, during assessment proceeding itself. It has been held by Hon'ble Supreme Court and Hon'ble jurisdictional High Court that it is a mandatory requirement of law to serve a notice u/s 143(2) before the proceedings culminates in the scrutiny assessment order u/s 143(3) of the Act. The question before us was dealt by the Hon'ble jurisdictional High Court in the case of CIT vs. Vardhman Estate P. Ltd. - (2006) 287 ITR 368 (Del.) as under :-
8 ITA Nos.1564/Del./2011
" .....
"Whether the actual service of a notice under section 143(2) of the Income-tax Act, issued before the date prescribed in the said provision, would relate back to the date of the issuance of the notice ?"
So far as this question is concerned it stands answered on all fours by the decision in CIT v. Lunar Diamonds Ltd. [2006] 281 ITR 1 (Delhi). The Bench had taken note of and rejected the contention of the Revenue that the words "served" and "issued"
are synonymous and interchangeable. In other words, this court negative the argument that the word "issued" must be read as "served". We are in respectful agreement with this view.
In the present case, the return was filed on October 31, 2001, and interims of section 143(2) the notice had to be served on the assessee on or before October 31, 2002. The argument is that there were two modes of service, i.e., by speed post as well as by a process server. The date of service, so far as speed post is concerned, is said to be November 1, 2002,but so far as the process server is concerned it is stated to have been effected on October 31, 2002. The Tribunal has accepted the contention of the assessee that the date of service through speed post was November 1,2002. Even before us, the appellant has not produced any material to suggest that the notice sent by speed post was served on any earlier date. On the other hand, it is sought to be contended that since the notice was dispatched by speed post on October 30, 2002, that should be the deemed date of service. We are unable to agree. So far as service by speed post is concerned, one point stands covered against the Revenue in CIT v. LunarDiamonds Ltd. [2006] 281 ITR 1 (Delhi).
So far as the service through the process server is concerned, the document which is annexure C to this paper book had not been filed before the Income-tax Appellate Tribunal when the first order dated March15, 2005, came to be passed. Mr. Jolly contends that the Income-tax Appellate Tribunal was in error in rejecting the rectification application on the grounds that annexure C did not form part of the record of the case, and that the Tribunal ought to have called for and perused the assessment record of which the said document forms part. On a query as to whether there is any rule or regulation mandating that the Income-tax Appellate Tribunal call for the assessment records while 9 ITA Nos.1564/Del./2011 considering an appeal, Mr. Jolly answers in the negative. In view of CIT v. Lunar Diamonds Ltd.[2006] 281 ITR 1 (Delhi) no substantial question of law arises. Dismissed."
It has been further held that non-service of section 143(2) notice within the prescribed time is an irregularity which cannot be rectified and so the scrutiny assessment u/s143(3) is vitiated for non-serving of 143(2) notice. Therefore, we have no other alternative but to quash the assessment framed u/s 143(2) of the Act. We also find support from the judgment of Hon'ble jurisdictional High Court in the cases of Commissioner of Income-tax v. Lunar Diamonds Ltd. - (2006) 281 ITR 1 (Del.) and Commissioner of Income-tax v. Vardhman Estate (P) Ltd. - (2006) 287 ITR 368 (Del.) and judgment of Hon'ble Supreme Court in the case of Assistant CIT & Anr. v. Hotel Blue Moon - (2010) 321 ITR 362 (SC). We order accordingly.
8. As we have already quashed the assessment framed u/s 143(2) of the Act, the other grounds have become infructuous.
9. In the result, the appeal of the assessee is allowed.
Order pronounced in open court on this 14th day of August, 2015.
Sd/- sd/-
(J.S. REDDY) (A.T. VARKEY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 14th day of August, 2015
TS
10 ITA Nos.1564/Del./2011
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT(A)-XI, New Delhi.
5.CIT(ITAT), New Delhi.
AR, ITAT
NEW DELHI.